As a small business owner, it is important to have a fundamental understanding of the business insurances available to you.
Those working under employment receive the protection of their employer, their employer is vicariously liable for their acts, errors and omissions. However, for the self-employed, there is no such safety net. Self-employed workers have sole responsibility of their services, making the need for the appropriate insurance policies that much more important.
This guide includes everything you need to get a basic overview of business insurance to help you start thinking about which policies you might need as a small business owner.
Business insurance helps to protect against financial losses stemming from incidents suffered or caused during the course of day-to-day business activities.
Business insurance is a broad term and encompasses many different policies covering a broad range of risks in relation to your business, from negligence in the services provided to accidents within the workplace.
Professional Indemnity (PI) Insurance is designed to protect you against legal action brought about as a result of third-party financial losses sustained by your client due to an error or omission in the services provided.
Businesses which provide any form of advice, design, or consultancy to clients should seek to protect against this risk.
Public Liability (PL) Insurance is designed to protect against legal action brought against you by third parties relating to physical injury or damage to property caused by the insured during the course of service provision.
Whilst more typically held by those providing manual services, any businesses who have any interaction with clients or the public may benefit from this cover. This is the most commonly held policy for the self employed.
Employers’ Liability (EL) Insurance is designed to protect against the injury, illness, or accidental death of an employee resulting in a compensation claim.
Any business employing more than the sole director/proprietor should consider their Employers Liability requirements.
Tax Enquiry Insurances cover professional representation fees incurred in defending/representing the policyholder against a range of HMRC enquiries. For example, PAYE compliance reviews, IR35 enquiries, and VAT disputes.
A tax enquiry insurance policy is valuable to any small business owner or self-employed professional responsible for their own taxes.
Not all business insurances are a legal requirement. Whilst you may be legally required to hold Employers’ Liability Insurance if you have any employees working for you, other business insurances such as Professional Indemnity are not legally required. Even if a certain insurance is not a legal requirement, you may still be required to hold cover. Stipulations could be found within a contract that you hold certain levels of cover, or it may be a requirement of a professional body, as may be the case for solicitors or accountants. Putting legal requirements aside, when it comes to deciding whether you need a certain insurance policy, you must undertake an assessment of the risk exposure of your business and make an informed decision based on this information.
The cost of business insurance will be calculated proportionate to the risk exposure of a business. When it comes to factors that impact insurance cost, insurers will typically seek to understand:
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